How pro-cashless politicians will jeopardise the poor and the economy

A recent article from Spectator points out the injustice of savers having had to pay the price for the previous economic crisis and warns against the crippling effects of a cashless future.

Before the 2007/8 economic crisis, lowering interest rates below 0 was seen as a radical if not impossible economic policy. Yet the recent years have seen the EU, Denmark, Sweden, Switzerland and Japan go into the negative interest rate policy.

This leads us to politically-driven cashless ambitions. In order to avoid bank runs and mass withdrawals in the face of the next crisis, an option that the public has a right to, policy-makers are turning to abolishing cash...

Bank of England’s chief economist Andy Haldane proposed establishing a government-backed electronic payment option in 2015, with the aim of negative interest rates being levied on currency... Such a dangerous idea, which would leave the poor and the economy at constant risk of blackouts and individuals at risk of losing all their savings over a 'glitch'.

Does that mean the UK is nearing a cashless future? Hopefully not. Yet, the nation was on that track two years ago, with David Cameron nearly including it in a Conservative conference speech that painted a cashless 2020. Thankfully, George Osborne noted that 'the public was not ready for such a dramatic move,' and it was omitted.

Abolishing cash to help set negative interest rates has been proposed, too, by Kenneth Rogoff, former chief economist of the International Monetary Fund. He argues that interest rates in the US at the height of the 2008/09 crisis should ideally have been lowered to minus 4 or minus 5 per cent, had it been possible.

It was Osborne, though, who is right. Attempting to withdraw physical currency would create anger, and not just for fogeyish reasons among people who like to see the Queen’s head on their coin and banknotes. It would enable the payments industry — which needless to say is a keen advocate of a cashless economy — hugely to increase charges for handling electronic payments. According to the Boston Consulting Group, the industry is smacking its lips at the prospect of doubling its annual worldwide income in fees from £1 trillion to £2 trillion by 2023 as consumers are persuaded, and in some cases forced, to go cashless. A cashless economy would disenfranchise the poor, who struggle to obtain bank accounts, put the retail economy at the utter mercy of systems which can and do fail, and make life impossible for businesses in rural areas without broadband connections.

It would take a little longer for the public to realise the underlying reason why governments and central bankers are so keen on a cashless economy — so that, come a recession, they could try to re-inflate a burst bubble by imposing negative interest rates. The last financial crisis left a nasty taste in the mouth: the wrong people were made to suffer. But that will be nothing compared with the injustices that will be wrought on blameless deposit-holders in the next crisis if we allow governments to abolish cash.